NYC, Northern Virginia win Amazon's HQ2 split

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Amazon has decided to split its plans for a 50,000-employee second headquarters between Long Island City, New York, and Crystal City in the Washington, D.C., suburb of Arlington, Virginia, the company announced today.

In addition, the internet retailing giant said it picked Nashville, Tennessee, to build a new business operations unit that will employ 5,000 and result in an investment of more than $230 million.

“We are excited to build new headquarters in New York City and Northern Virginia,” said Jeff Bezos, founder and CEO of Amazon. “These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come. The team did a great job selecting these sites, and we look forward to becoming an even bigger part of these communities.”

New York

Amazon will deliver 25,000 high-paying jobs, as well as $2.5 billion in direct investment to Long Island City. It plans on taking up 4 million square feet of office space, with the ability to expand to 8 million square feet. The company expects to generate more than $10 billion in tax revenue during the next 20 years as a result of its move to the region. Amazon will also donate space for a tech startup and a site for a new school, as well as make public space and infrastructure improvements.

In return, Amazon will receive more than $1.5 billion in performance-based incentives. This includes a refundable tax credit of up to $1.2 billion tied to employee salaries and a cash grant of up to $325 million from Empire State Development based on the square footage of buildings it occupies. The company said it will also apply for other incentive programs.

Northern Virginia

The company will make a similar direct investment into its Crystal City headquarters and take about the same amount of space, with expected incremental tax revenue generation of $3.2 billion during the next 20 years. Amazon noted that the location will use the name National Landing, which is an umbrella term for the adjacent neighborhoods of Pentagon City, Crystal City and Potomac Yard.

Amazon will also receive performance-based direct incentives in Virginia — up to $573 million tied to job creation, including a $23 million cash grant from Arlington based on the growth of an existing hotel room tax.

As part of the deal, Virginia will invest $195 million in local infrastructure, including improvements to Metro stations; a pedestrian bridge connecting National Landing and Reagan National Airport; and other pedestrian improvements in the area. Arlington has also committed approximately $28 million of future property tax revenues earned from on-site infrastructure and open space in National Landing.

JBG Smith followed today's announcement with the notification that the retailing giant had selected it as a development partner; Amazon will have exclusive rights to lease several buildings owned by the developer and to purchase land owned by it.

The announcement has ended a year of speculation by officials in the 20 short-listed cities including Dallas, Chicago and Atlanta — many of which offered Amazon hefty tax breaks and other incentive packages — but has also spurred allegations that Amazon never intended to create a headquarters on par with its current base in Seattle. Even if the selection process was part legitimate search and part public relations stunt, the move means big changes are in store for New York's and Virginia's construction industries.

“When Amazon announced their search for a location for HQ2, every New Yorker knew it should be here, and Queens is the perfect home for them," said Carlo Scissura, president and CEO of the New York Building Congress. "Amazon will be a tremendous boost to New York's economy and stimulate countless industries, from technology and innovation to design and construction. The New York Building Congress and our members look forward to working with Amazon and government on this exciting venture and ensuring that necessary infrastructure improvements are expanded and built.“

The sentiment was much the same from the Virginia building industry.

“Amazon selecting Crystal City for its second headquarters will be a definite boost for the local economy," said Patrick Dean, president of the Associated Builders and Contractors Virginia Chapter. "Not only will the vacant buildings in Crystal City now be repurposed, which will revitalize the area, but it will also bring a boost of construction activity throughout Northern Virginia.”

It remains to be seen, however, if welcoming Amazon will mean more traffic jams, higher housing costs and an increase in the area's homeless population as some Seattle activists have warned.